Insurance

Contributed by Jo Boots and Robert Guthrie and current to 1 September 2005

(see also INSURANCE )

TYPES OF INSURANCE

There are three different types of insurance policies for motor vehicles.

• compulsory third party – this is a compulsory insurance that is paid at the time a person registers a motor vehicle. The cover by that policy only extends to claims against the person as the owner or driver of the vehicle by other persons claiming damages for personal injuries. The only body who administers this insurance is the Insurance Commission of Western Australia;

• comprehensive vehicle insurance – this type of policy covers claims for property damage and incidental loss flowing from property loss. It covers both claims brought against the insured as well as damage to the insured’s own property arising out of an accident. Most insurance companies offer this type of insurance;

• third party property insurance – this type of policy only covers claims brought against the insured by other persons for damage to their property and loss flowing from an accident. It is usually taken out by owners who consider that the vehicle they are driving is not sufficiently valuable to insure comprehensively or who feel that they are unable to afford comprehensive insurance. This insurance can be arranged at a relatively low premium cost, depending upon the age and history of the driver. It is advisable to contact a number of different insurance companies to obtain quotes for the cost of this insurance. Most insurance companies offer this type of insurance.

LOSING THE RIGHT TO CLAIM ON THE INSURANCE POLICY

When an insurance policy is taken out on a motor vehicle it is advisable to read the terms of the policy carefully. Most comprehensive and third party property policies contain special conditions finding the owner of the vehicle, and failure to comply with them in certain circumstances can result in the insurance company refusing to accept the claim. Some common problems are:

Failing to report the accident

Most policies require the insured to report any accident or damage as soon as possible after the accident has occurred and the damage sustained. Even if the owner does not intend to make a claim on the insurance company, it is still advisable to notify the insurance company of the incident, indicating that the notice is not a claim.

Alcohol

Most policies also stipulate that no cover will be provided if, at the time of the accident, the vehicle was being driven by a person under the influence of a drug or intoxicating liquor exceeding a prescribed blood alcohol level.

Unlicensed driver

Most policies provide that the insurer can refuse to cover a claim if the vehicle, at the time of the accident, was being driven by an unlicensed driver. This includes a person to whom the owner has loaned the car. Someone lending their car should always check that the other person has a current driver’s licence. This will protect the owner, the driver, and anyone suffering damage in an accident involving the owner’s vehicle.

False or incomplete particulars

At the time when a person arranges insurance, they should make sure that all questions asked by the insurance company on the proposal form have been truthfully answered. Questions are asked about the owner’s past driving record and there is an obligation on the owner to truthfully and fully disclose all factors relevant to the risk to be insured and to the insured’s past driving history. If the owner does not do so, the insurance company may refuse to honour a claim. If the owner’s claim is refused, he or she should get legal advice as to whether the insurer was justified in refusing the claim.

COMPREHENSIVE INSURANCE

If a person’s vehicle is covered by a comprehensive insurance policy, the following factors must be considered in deciding whether to make a claim on the insurance policy:

• the excess applicable to the policy;

• the amount of the no claim bonus;

• if the other party is at fault, are they insured or have sufficient assets to meet the cost of the repairs?;

• if legal proceedings are commenced, what are the likely legal costs?;

• who was negligent and what is the likely apportionment of damages; and

• the amount of damage to each vehicle.

EXCESS ON A POLICY

The excess is an amount stated in an insurance policy to be the amount payable by the insured when making a claim on the policy. The excess can vary depending on the insurance company, the age of the driver and the insured’s driving history. All insurance companies insist in motor vehicle policies that where a claim is made on a policy and, at the time of the accident, the vehicle was driven by a person under the age of 21 years or between 21 and 25, then a special age excess will be applied over and above the normal excess on the policy.

Example of how an excess works

If the insured person’s excess is $100, and the cost of repairs is $750, then the insured must pay the first $100 and the insurance company the remaining $650. If the insured has made a claim on the policy and has had to pay an excess, it is possible for the insured person to recover the excess from the other driver if the accident was the fault of the other driver.

NO CLAIM BONUS

In calculating the amount of insurance premium the insured person will pay each year on a comprehensive policy, companies have adopted a general principal of rewarding owners of vehicles who have not made claims on their policy during the year of the insurance. Where there has been no claim, the company will normally, at the renewal of the premium, adjust the rate so that the insured receives a discount. Conversely, if the insured has made a claim throughout that year, then the premium will usually be increased as a result.

It is therefore advisable before making a claim on a policy to ascertain what effect the claim will have on the no-claim bonus.

The no-claim bonus is generally worked out as a percentage of the standard premium. Different insurers apply different percentages of no-claim bonuses. Some insurance policies are called fully cushioned policies. This means that if a person makes a claim, the no-claim bonus does not become completely cancelled, but goes up one rating. Some insurance policies include an optional extra of being able to insure against the loss of the no-claim bonus by making a claim.

Some insurance companies will permit the insured to keep their no-claim bonus even if a claim has been made, if the accident was not the insured person’s fault and the insurance company has been able to recover the damages from the party responsible.

In these circumstances, the insurance company will normally seek to recover all or part of the insured person’s excess from the other driver.

If an insured person makes a claim on their insurance policy, the insurance company can commence an action against the other driver in the insured person’s name. This is called subrogation. In such a case the insured person’s insurance company will pay all of the legal costs of the action. Actions by subrogation are common. An insured person may be called as a witness if the matter gets to the stage of a hearing.

COMPLAINTS ABOUT INSURANCE COMPANIES

If you are not happy about the way in which your insurance company has handled your claim, you may complain to the Insurance Ombudsman Service, whose contact details are provided at the end of this chapter.